Performance Compensation Commitment And Corporate M&A

Performance compensation commitments are increasingly used in M&A transactions,but the market has been criticized and questioned by the performance compensation commitments along with"high commitments","high valuations" and"high premiums".So how does the performance compensation commitment affect the distribution of interests of both parties?Is there a mechanism to improve the impact of performance compensation commitments and make M&A transactions more fair and reasonable?This paper selects the M&A events of China's Shanghai and Shenzhen A-share listed companies in 2011-2016 as a sample of research.This paper discusses whether performance compensation commitments have an effect on M&A premium and corporate performance,and examines the regulatory effect of asset appraisal institutions' reputation in performance compensation commitments.The empirical results show that:(1)M&A transactions with performance compensation commitments have higher M&A premium;(2)Performance compensation com:mitments significantly improve the short-term market performance of the acquirer companies compared to M&A transactions without performance compensation commitments.Long-term accounting performance have the same effect.However,the improvement of long-term accounting performance is only significant during the commitment period,and there is no significant difference after the commitment expires;(3)The use of share repurchase of performance compensation methods strengthen the improvement of performance compensation commitment for short-term market performance and long-term accounting performance;(4)The high-prestige asset appraisal mechanism weakens the positive impact of performance compensation commitment on M&A premium and strengthens the positive impact of performance compensation commitment on short-term market performance.Further analysis found that the impact of performance compensation commitments on M&A premium and long-term accounting performance of enterprises is only significant in non-state-owned enterprises and regions with high degree of marketization,while the impact on short-term market performance is not significantly different.This paper comprehensively analyzes the impact of performance compensation commitments on both parties,and examines whether there is heterogeneity in performance compensation commitments under different property rights and different institutional environments.To some extent,the existing literature on performance compensation commitments has been improved.At the same time,this paper analyzes whether the role of asset appraisal institutions' reputation on performance compensation commitments has a regulatory effect,which provides a new perspective for studying the reputation of asset appraisal institutions.